Do Loyalty Programs Really Create Loyalty?

Lately, I’ve been asked about loyalty programs. Any company can create a loyalty program. But, there is some confusion around what exactly a loyalty program is. A Wikipedia definition of a loyalty program summed it up well: Loyalty programs are structured marketing strategies designed by merchants to encourage customers to continue to shop at or use the services of businesses associated with each program.

“Structured marketing strategies.” Now, that’s an interesting way of putting it. Anything you do to get a customer to start to do business with you – and gets them to return – could fall under the concept of a marketing strategy. I’m good with that. But, when it comes to a loyalty program, that is going to drive repeat business, there are three types. One is a discount or perks program. Another is a relationship program. The third is a membership program.

A discount or perks program is exactly what it sounds like. When you buy five sandwiches at a restaurant and you get the sixth one free. Or when the airlines give you a free trip or upgrade to first class based on how many miles you’ve accumulated. These programs may drive repeat business, but don’t always create loyalty. If you took the benefits away, would the customer continue to do business with you? The danger here is…

Sometimes customers are loyal to your loyalty program and not your business.

But, then there are other loyalty programs that offer you something quite different than what can be deemed a financial incentive to do business with them.

Nike is a great example of a relationship program. When you sign up for Nike’s program, it’s about content and connection, not discounts. If you are buying running shoes and have identified yourself as a marathon runner, Nike may send you news and videos related to exactly that. You won’t receive content related to basketball. They personalize your Nike experience. Their content educates you, lets you know what new products are coming out and more. They know you, they know what you like, and they make you feel connected. Currently, Nike has over 100 million members in their “loyalty program.”

The third type of program is a membership program, which can also drive repeat business and loyalty. Amazon’s Prime program is the perfect example. I love this program, and I’ve written about it before. You pay for being a member, and once you do, you get access to perks and amenities, such as Prime video content and more. However, your perks don’t get better based on how much you buy. Everyone is treated the same. You are simply part of a membership program that doubles as a loyalty program. After all, if you paid good money to be part of the program you’ll probably want to take advantage of all it has to offer.

Is one type of loyalty program better than the other? I like any loyalty program as long as you recognize what you’re trying to achieve. To me, one of the best perks you can offer any customer is an amazing customer experience that makes them want to come back. Combine that with your “official” loyalty program and the discount and perks are “the icing on the cake.”